October 13, 2011
Uncategorized
By Geoff Bysshe
Yesterday's Focus List suggested it would be hard to see a trend day given how much the market had already moved up over the last 5 days. Well the indexes, the SPY and DIA that did have worthwhile trend days, also came all the way back to the breakout. The strongest index, QQQ, closed on the low of the day and below the opening range. And the dog of the 4 market watch, the IWM, performed somewhere in between the best and the worst leaving it in dead last in terms of its performance over the last 5-7 days.
That summary is not insignificant. It describes action you'd expect to see in a market that needs a break. As you can see by the chart below based on closing prices, the location could not be more perfect to expect a consolidation or significant correction. But we'll use key reference points to keep the pulse of if and when any sell off is likely. To that end there is a one thing all the indexes have in common that has not happened since the lows over a week ago - all 4 closed below their next day pivot levels which means that if they open unchanged they will start the day below their FTP (the one exception being the IWM on one day). Therefore, it will be important to see how this level impacts them all on Thursday.
A recent training video described the process of markets stepping up or down, then transitioning with price action relative to the FTP. Thursday has the potential to be that transition day. I'll keep you posted.
The last Focus List said to that S1 would be a key level to watch. The trading pivots on the downside are now even more important given Wednesday's action. The same can be said for prior day lows. Neither of these levels have been reached during this last rally in any of the indexes with the one day exception in the IWM. These levels line up with good support created by consolidation within the prior days, so watch for a bounce off them, but remember that trading below these levels shift the short term bias to negative so adhere to stops!
Personally, I'd like to see more of a rest than one touch of the S1 level, so for trading reversals in the indexes at this points I'd like to see a divergence to support it. Otherwise, I'll be patient.
Focus List Stocks
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